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DECREE No

DECREE No. 26/2001/ND-CP OF JUNE 4, 2001 AMENDING AND SUPPLEMENTING A NUMBER OF ARTICLES OF THE GOVERNMENT�S DECREE No. 30/1998/ND-CP OF MAY 13, 1998 DETAILING THE IMPLEMENTATION OF THE LAW ON ENTERPRISE INCOME TAX

THE GOVERNMENT

Pursuant to the Law on Organization of the Government of September 30, 1992;

Pursuant to the Enterprise Income Tax Law (No. 03/1997/QH9 of May 10, 1997);

Pursuant to Clauses 11 and 12, Article 1 of the Law amending and supplementing a number of articles of the Foreign Investment in Vietnam Law (No. 18/2000/QH10 of June 9, 2000);

At the proposal of the Minister of Finance,

DECREES:

Article 1.- To amend and supplement a number of articles of the Government�s Decree No. 30/1998/ND-CP of May 13, 1998 detailing the implementation of the Law on Enterprise Income Tax as follows:

1. To amend and supplement Clauses 1, 6 and 7, Article 3 stipulating the turnover for calculating the taxable incomes as follows:

a) Clause 1, Article 3 shall be amended and supplemented as follows:

"1. For goods and services which are sold or provided by production and/or business establishments, it shall be the total sum earned from the goods sale and/or service provision, including price subsidies, surcharges and extra amounts earned by such production and/or business establishments. If the production and/or business establishments pay value added tax directly on the added value, the turnover for calculating taxable incomes shall also include the value added tax. The time for determining the turnovers for calculation of the taxable incomes shall be the time when goods and/or services are consumed, regardless of whether the money paid for them are collected or not. The Ministry of Finance shall specify the turnovers for calculating taxable incomes for a number of peculiar activities."

b) Clause 6, Article 3 shall be amended as follows:

"6. For property-leasing activities, it shall be the rentals to be collected in each period according to contracts. In cases where the lessees pay rentals in advance for many years, the turnover shall be divided for the number of such years correspondingly."

c) Clause 7, Article 3 shall be amended as follows:

"7. For credit activities, it shall be the to-be-collected loan interests arising in the tax calculation period."

2. To amend and supplement Clauses 6 and 7, Article 4 stipulating the reasonable expenses allowed to be subtracted when calculating the taxable incomes as follows:

a) Clause 6, Article 4 shall be amended and supplemented as follows:

"6. Expenses paid to female laborers as prescribed by law; labor protection expenses; expenses for working clothes according to the maximum levels prescribed by the Ministry of Finance; expenses for the protection of the business establishments; deductions for social insurance and health insurance funds which fall under the responsibility of the labor-employing business establishments; trade union�s budget; deductions for forming the financial sources to cover expenses for management by superior bodies according to the prescribed regime."

b) Clause 7, Article 4 shall be amended as follows:

"7. Payment for the interests on the capital borrowed from credit institutions, as well as other organizations and individuals according to the actual interest rates agreed upon when signing the borrowing contracts, which, however, must not exceed the highest lending interest rate announced by commercial banks at the time of signing the borrowing contracts".

3. Article 5 shall be amended as follows:

"Turnovers and reasonable expenses shall be recorded in the accounting books of business establishments in Vietnam dong. In cases where a turnover or expenditure is made in foreign currency, it must be converted into Vietnam dong at the average exchange rate of the inter-bank market at the time when such turnover or expenditure arises".

4. Clause 3, Article 9 shall be amended as follows:

"3. For business establishments that have convenient business locations, less competitive but highly profitable business lines, if, after paying enterprise income tax at the tax rate of 32%, the remaining income is higher than the existing capital of their owners by 20%, the amount exceeding 20% shall be liable to enterprise income surtax at the rate of 25%.

Enterprise income surtax shall be temporarily not collected in the following cases:

a) Business establishments entitled to enjoy the enterprise income tax rate of 25% for a period of three years as from the effective date of the Law on Enterprise Income Tax as prescribed in Clause 2, Article 9 of the Government�s Decree No. 30/1998/ND-CP of May 13, 1998;

b) Investment projects in the fields, production and/or business lines or geographical areas where investment is encouraged, which are entitled to enjoy the enterprise income tax rates of 25%; 20% or 15% as prescribed in Clauses 4 and 5, Article 9 of the Government�s Decree No. 30/1998/ND-CP of May 13, 1998;

c) Production establishments exporting more than 50% of their products or having an export turnover accounting for more than 50% of their total turnover."

5. Article 12 shall be amended as follows:

"All incomes earned by foreign investors from their investment in Vietnam (including the refunded income tax amount and the amount of income tax gained due to capital transfer), which are either transferred abroad or kept outside Vietnam, shall be liable to tax on the transfer of income abroad.

The rates of tax on the transfer of income abroad are specified as follows:

1. The tax rate of 3% shall apply to:

a) Overseas Vietnamese investing in the country under the Law on Foreign Investment in Vietnam;

b) Foreign investors investing in industrial parks, export-processing zones and hi-tech parks;

c) Foreign investors, who contribute an amount of USD 10 million or more to legal capital or capital for the performance of business cooperation contracts;

d) Foreign investors, who invest in geographical areas meeting with special socio-economic difficulties, which are on the list of geographical areas where investment is encouraged.

2. The tax rate of 5% shall apply to:

a) Foreign investors, who contribute an amount of from USD 5 million to under 10 million to legal capital or capital for the performance of business cooperation contracts;

b) Foreign investors investing in projects on medical examination and treatment, education and training or scientific research.

3. The tax rate of 7% shall apply to foreign investors who make legal capital contributions or business cooperation capital contributions other than cases prescribed in Clauses 1 and 2 of this Article".

Article 2.- This Decree takes effect 15 days after its signing and applies to the final settlement of enterprise income tax as from 2001.

The provisions of the Government�s Decree No. 30/1998/ND-CP of May 13, 1998 detailing the implementation of the Law on Enterprise Income Tax and other guiding documents, which are contrary to this Decree, are hereby annulled.

Article 3.- The Minister of Finance shall guide the implementation of this Decree.

The ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government and the presidents of the People�s Committees of the provinces and centrally-run cities shall have to implement this Decree.

On behalf of the Government

For the Prime Minister

Deputy Prime Minister
NGUYEN TAN DUNG